By JEFF BARNARD

Associated Press

GRANTS PASS, Ore. (AP) -- A federal agency is holding back 10 percent of a special payment to timber counties in Oregon in case federal budget cuts known as sequestration go through, posing another hardship for rural counties already struggling to pay for law enforcement and other services.

The U.S. Bureau of Land Management was supposed to hand out $38 million to 18 so-called O&C Counties in Western Oregon as part of a one-year extension of the Secure Rural Schools Act, which made up for reduced logging receipts.

Members of Oregon's congressional delegation and the counties were outraged that the BLM held back $4 million, especially when the payment was approved by Congress last year, and the U.S. Forest Service gave out its full share.

"The impact of a 10 percent cut on counties who are already in a death spiral due to the lack of any meaningful production from our forests only underscores the need to get back to work in the woods which will grow healthy communities," Rep. Greg Walden, R-Ore., wrote in a letter to Interior Secretary Ken Salazar and Office of Management and Budget Director Jeffrey Zients.

BLM spokeswoman Celia Boddington said the agency recognized the confusion over the status of the funds, but felt the timber county payments came under the across-the-board automatic spending cuts known as sequestration. The cuts originally were supposed to go into force at the start of the year, but have been put off by Congress until March 1.

Association of O&C Counties executive director Rocky McVea said counties are telling him they will have to lay off sheriff's deputies, prosecutors and health care workers if the cuts stand up.

"It's definitely a hardship. Counties, particularly in southwestern Oregon, are struggling as it is," McVea said. "They have the rest of this month and four other months to make up the loss."

The BLM payment is supposed to go out Friday.

Since 1937, the O&C Counties have received half the revenues from timber cut on a patchwork of federal lands in Western Oregon that reverted to the federal government after the bankruptcy of the Oregon and California Railroad.

The lands are managed by BLM. When logging was booming in the 1970s, some counties did not have to charge property taxes. But since cutbacks in logging on federal lands to protect the northern spotted owl and salmon, the payments dropped precipitously. A federal safety net to make up for the drop is expiring, and so far taxpayers have refused to make up the difference.

Copyright 2013 The Associated Press.